In contrast to President Javier Milei’s views on the Argentine peso, the recent measures being implemented—with the endorsement of Economy Minister Luis Caputo—are aimed at a significant rebound of the local currency. This focus is central to the second phase of the economic plan. To provide more insight into this situation, Canal E reached out to economist Luis Secco.
“There is a waiting period; the government is attempting to send strong signals that there will be no further issuance of pesos, which should lead to a lower inflation rate,” Secco noted. He added that there are still some persisting issues, as many Argentinians believe that everything is too expensive in dollars. When prices soar in dollars, prices in pesos tend to skyrocket as well.
Regarding the expectations for the second phase of the economic plan, Secco stated, “We should anticipate a correction. The second phase is likely to resemble the first in its approach to correcting relative prices. We can expect a third phase to complete this correction.”
“The market is observing more than just the open or closed taps of the Central Bank, especially in the short term. While the absence of new peso issuance might be positive in the long run, we still need to address the correction of relative prices in the short term,” he explained. He also expressed concern about how Argentina would manage its debt obligations without issuing more pesos to acquire dollars.
Secco pointed out that the issue of dollarization has arisen from a lack of demand for pesos due to their diminished value. He explained, “Dollarization was previously driven by people not wanting pesos because they were virtually worthless. Now, if there are no more pesos in circulation, the remaining pesos might become so prized that everyone will want to hold onto them, leading to an increased demand for dollars.”
In conclusion, Secco emphasized the confusion that can arise when transitioning from a weak and worthless peso to a strong currency. He highlighted that this creates two very different economic environments, where risk assets hold significantly different values, adding to the overall confusion.
Source: https://www.perfil.com/noticias/canal-e/luis-secco-genera-un-poco-de-confusion-ir-de-un-peso-debil-y-despreciable-a-un-super-peso.phtml
